The threat posed by the big Internet players, especially Google and Apple, to traditional Telco operators has been talked about for over a decade, but has not yet materialised substantially as far as core services such as broadband and pay TV are concerned.
That is now changing fast as the battle enters the home where the prizes may initially be small but will amplify greatly over the next few years. Indeed with relatively few homes yet having a network worthy of the name, it is all up for grabs in what could become a winner takes all game around the emerging IoT (Internet of Things).
Google’s gambit for control of the home has materialized in the form of its OnHub, allied to a variety of technologies or initiatives such as Project Fi. The latter is currently available in the US as a heterogeneous mobile service combining Wi-Fi and cellular from either Sprint or T-Mobile, allowing voice calling over Wi-Fi. OnHub was launched as a rather expensive Wi-Fi router but is much more than that, incorporating a powerful 1.4 GHz Qualcomm dual core chip and potential to be hooked up with Project Fi for an integrated broadband and voice service. It has been billed as Google’s Trojan Horse to enter the home Wi-Fi domain currently loosely occupied in many cases by broadband operators as providers of the routers themselves. Significantly, with OnHub, Google has immediately addressed the three major Wi-Fi pain points for consumers, which are setup, coverage, and troubleshooting, with provision of statistics on Wi-Fi traffic and usage.
Meanwhile Apple has been quietly fleshing out its HomeKit as a central point of control for multiple smart home devices. Such initiatives throw down the gauntlet to operators not just by invading their territory but also by threatening to innovate and introduce new services faster than Telcos have traditionally been able to do with their cumbersome hardware based platforms.
Telcos therefore need a two pronged strategy to meet this threat from the big Internet players. Firstly they need to stay ahead in the home by developing fully functioning gateways that offer a more complete range of functions than Google or Apple can yet, while addressing those Wi-Fi pain points. Secondly and more fundamentally they must migrate to a more flexible and agile software based approach through virtualized cloud services. By separating hardware from software both in the network or cloud and in the home, they can reduce their costs, both Opex and Capex, while enabling much more rapid deployment of new services. Changes and additions can be made just in software running on a common hardware base.
Some more visionary operators have already done this and are reaping the rewards, having anticipated the threat earlier than most. One is Swisscom, Switzerland’s largest Telco, which is already well advanced with a major cloud transformation project for virtualizing its IT across its whole end to end infrastructure. At the CPE level, SoftAtHome has been collaborating with Swisscom and developed the Internet Box, bringing a wide range of functions and features for the connected home. The main reason for Swisscom’s choice of SoftAtHome as partner was strategic, to provide a foundation for CPE virtualization and enable rapid deployment of innovative services for the digital home in future.
Another SoftAtHome customer Orange is also highly committed to virtualization and the cloud, having in June 2015 launched its I/O Lab dedicated to the task. This was motivated, according to Orange, “by an impending radical transformation in the next decade as a result of the progress of virtualization techniques”. This involves all aspects of the cloud, including the outer access layer now referred to as “Fog”, involving deployment of resources off the premise but at the edge of the network for processes that may require some local control or be latency dependent. Orange’s cloud/virtualization strategy also extends to the CPE, where SoftAtHome is a major partner.
For both these operators virtualization is at the core of a strategy for agility to repel the Internet players and then to grow their business in the digital home beyond broadband and TV into new areas around the IoT. They were quick to see that unless they pushed ahead quickly with virtualization and at the same time developed compelling gateways for the home, they would lose customers to the Internet invaders and miss out on these enticing new opportunities.